Our new ESG Starter Pack for software startups is out
You have probably come across environmental, social, and governance – or ESG, for short. ESG relates to how a company manages its environmental impact, the company's relationship with its stakeholders, and the company practices and procedures to govern itself, comply with laws, and make decisions.
One of the biggest effects that ESG will have on venture capital funds, and subsequently portfolio companies, is through the EU’s Sustainable Finance Disclosure Regulation (SFDR). Coming into effect in 2023. SFDR will demand that venture capital firms track and report portfolio companies’ ESG initiatives.
Founders and startups are more purpose and impact-driven than ever before with “tech for good” and impact-investing funds rapidly growing. But for stretched software startups, the ESG burden often leads to confusion and burning-up resources that they just do not have in order to align to frameworks that have been built for major corporations or hardware companies.
In short, we saw a need to demystify what ESG really means for software companies.
Why an ESG Starter Pack for software startups was needed
“Any company listing or being acquired will need to have their ESG matters in check. We strongly recommend companies start building their ESG foundation early to make it a core part of their culture and growth.” – Patrik Backman, OpenOcean GP
In the past, we have already tracked several ESG metrics in our portfolio companies, such as team and board diversity. In anticipation of the SFDR regulation, we have now created an ESG Starter Pack to better help and support our portfolio companies – and to give software startups a common ESG plan to lean on.
Even if ESG reporting can seem daunting and burdensome for portfolio companies to comply with, incorporating ESG practices can help a company in several ways and ultimately increase shareholder value.
In addition to improving the world, the short and medium-term benefits software startups can gain from ESG are:
- Easier to attract and retain employees
- Improved decision-making and use of resources
- Higher chance to secure future financing
- Reduced risk of legal liabilities
- Head start in B2B sales and B2C customer preference
Our new ESG Starter Pack is created to help you with the first critical steps of your ESG journey.
The Starter Pack includes:
- Our recommended ESG roadmap for software startups, including deep dives on each focus area
- Main KPIs to track your progress
- Practical advice to get started
We hope you find the Starter Pack helpful in your journey to better track your own ESG roadmap. Feel free to drop us a message with questions or additional ideas – we will edit the Starter Pack on a continuous basis.
We also warmly welcome fellow early-stage VC investors to use the KPIs in the ESG toolbox as a starting point for reporting requirements set out by the new EU Sustainable Finance Disclosure Regulation (SFDR) Article 8. We hope that this KPI framework can help us investors to consolidate our annual reporting requirements, and create a common language on the most relevant ESG KPIs for software startups.